A-share IPOs expected to slowdown next year
Dec 29, 2018 (China Knowledge) - The number of companies waiting for IPO approval from the China Securities Regulatory Commission (CSRC) has contracted to a five-year low due to global trade tensions and stricter regulations.
This year, 105 companies went public in China’s A-share market falling by 76% compared to last year. The total funding raised through these IPOs was RMB 138 billion, falling by 40% from last year.
The top five sectors that attracted the largest amounts of funds were, technology, finance, industrials, retail and healthcare. Within the finance sector, banks and securities firms took the lion’s share of the IPOs, different from other developed markets where there tends to be greater diversification.
30% of IPO applications were rejected this year, compared to 17% last year with 150 companies deciding to terminate their IPOs this year as well increasing by 36% from 2017.
Tighter regulations have forced companies to become more disciplined. Some companies have decided to suspend the IPO applications temporarily to adjust their business first while others are waiting to achieve better business performance before going ahead with their IPOs.
In the long run, the tighter listing process will help to improve quality of companies being listed.
One of the government’s main priorities next year is the setting up of a new science and technology innovation board in Shanghai to attract more IPO activity back to mainland China. The new board is said to make it easier for new innovative tech companies to get listed by removing the profit requirement.
Currently, only profitable companies are allowed to be listed on the main Shanghai and Shenzhen boards, effectively disqualifying many new tech companies.
In addition, China’s National Equities Exchange and Quotations (NEEQ) or the New Third Board has also reached an agreement with the Hong Kong stock exchange to allow NEEQ companies to list in Hong Kong without having to delist from the A-share market.
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